Australia’s Productivity Is Directly Linked To Stagnant WagesBy Anthony K
Productivity is the efficacy with which an economy employs resources to yield economic output. In productivity, growth is the main driver as far as living standards, and per capita income are concerned. Some productivity trend determiners include efficient use of resources such as capital, land, labor, and new technologies. Together, when well organized in the production process, these factors determine an economy’s capacity to supply services and goods.
Productivity is essential in every country, including, of course, Australia. It has been one of the long-term improvement drivers in people’s living standards. For instance, an average worker in Australia today produces about as much in an hour as it took a day full of work in 1901. Productivity improvement has made it possible to increase efficiency and increase income even with reducing working hours, allowing Australian residents even to enjoy more leisure time.
Economists measure productivity in two major ways:
- Labor productivity is the output ratio to work hours. Time wages increase as labor productivity increases, and this is the major income growth determinant.
- The multifactor productivity is the output ratio to the combined capital and labor input. This is a better measure of efficiency improvement than labor productivity.
In many countries, including Australia, productivity is measured in the industries and sectors that prices are set in, referred to as the market sectors. Here the market prices offer a measure of the various product quality, making it easier to measure the productivity in terms of product quality and ensuring it is easier to measure output in terms of gross industrial value. There is a clear correlation between wage increases and productivity. This is why Australian productivity has not increased even as technological advances have streamlined many business practices.